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Boom - Time Property Purchasers not Forced to Complete Sale

DATE: 23.06.2011

 

In the recent judgement of Aranbel Limited v McGivern and Others, Justice Clarke considered the implications of a typical recession fuelled scenario: the consequences for those who entered into contracts to buy property at market peak, and who are called upon to complete at a purchase price which now far exceeds the current value of the property.

The case was heard in the context of a motion for judgement where, rather than file a defence, the Defendants admitted that the Plaintiff was entitled to some relief, but claimed that damages in lieu of specific performance would be a more appropriate remedy to an order for specific performance in circumstances where the latter would be impossible in light of the Defendants’ current financial situations. Justice Clarke stressed that specific performance is an equitable remedy, and found that, if there is no real possibility of a sale closing, a court should not make such an order as it would achieve nothing. It would simply lead to a further hearing at which the order would be discharged and damages in lieu directed.

The judge did however draw a distinction between impossibility and hardship, indicating that a court will be more likely to order specific performance where, though its implementation might cause hardship, it is actually possible. By way of example, the judge considered a situation whereby a family would be forced to sell the family home in order to complete a sale and indicated that this would merely constitute hardship rather than ‘impossibility’. He was satisfied however that impossibility arising from lack of funds was reason enough to refuse an order for specific performance. The onus of proof lies on the party making such a claim to show financial inability to complete.

Interestingly, the judge commented that, if a person wrongfully places himself in a position where he cannot complete, specific performance would still constitute an order in vain and while other remedies might be available in such a scenario, specific performance should not be ordered. Ultimately the Plaintiff was ordered damages in lieu of specific performance and the Defendants were not compelled to complete the sale.

Noreen Howard

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